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The Textile Magazine
August 2012
Rs. 36,000-cr. loans to
be restructured
industry news
The Government has issued directions to banks for
restructuring of textile industry loans on a case-by-case
basis in accordance with the Reserve Bank of India’s
prudential guidelines on restructuring of advances by
banks.
Bank of Baroda Capital Market has, in its assessment
report on stress in the textile industry, has estimated
that the total fund based credit (including TUFS) ex-
tended to the textile industry was at Rs. 155,809 crores.
With the addition of the estimated non-fund credit of
Rs. 15,542 crores, the total exposure of banks to the
textile industry amounts to Rs. 171,351 crores.
On the basis of revenues and cost projection of
303 companies for FY 12, Bank of Baroda Capi-
tal Market Ltd. has arrived at an EBIT of Rs.
13,311 crores. On that EBIT, there
is a deficit to the tune of 25.8 per
cent (or Rs. 4,630 crores)
on
a debt + interest pay-
able of Rs. 17,942
crores per year.
On this basis, it
is expected that the
outstanding debt at the end of
FY12 should be Rs. 100,617
crores, of which 25.8 per cent
needs to be rescheduled. This works out to Rs. 25,967
crores, and if another Rs. 10,000 crores is to be added,
which would be the loss in value of the inventory, the
total loans that need to be restructured should be about
Rs. 36,000 crores.
The restructuring by banks under RBI’s extant guide-
lines is to be completed in 90 days after the applica-
tions are submitted in the prescribed formats to banks.
A meeting on debt restructuring was chaired by the
then Finance Minister where the following decisions
were taken:
l
The detailed study and the restructuring proposal
by Bank of Baroda Capital Markets may be forwarded
to the Reserve Bank for its consideration
l
Individual banks will provide a window for
restructuring of loans for textiles industry on a case-by-
case basis
l
The Administrative Ministry will mobilize the
industry to formulate the case-by-case restructuring
proposals
l
An inter-ministerial group of officers may be con-
stituted to help the industry sort out issues.
The study report was for-
warded to RBI which,
in its response on
June 29, said:
(i) The case for
asset classification
benefit on second
restructuring is not
justified
(ii) The concession
sought on provision-
ing is not acceded
to, as provisioning is
the first defence against
expected losses
(iii) RBI has expressed its ‘no objection’ to morato-
rium on repayment of principal amounts and conver-
sion of working capital into working capital term loans
repayable over a period of 3-5 years.
In pursuance of the RBI advice, the Ministry of Fi-
nance has issued directions to banks to create a special
window for textile industry debt restructuring on case-
by-case basis.
A group of officers was constituted by Government
on June 13 to co-ordinate with banks and the textile
industry for restructuring of loans.
w